Tastytrade Top Dogs

Discussion in 'Options' started by Eliot Hosewater, Oct 21, 2015.

  1. Anyone been watching Tastytrade Top Dogs? I was wondering what people thought about their Core Positions.

    Basically they say to buy a handful of negatively or non-correlated ETFs and sell covered calls at 30 deltas. They picked 5 - S&P500, Russell 2K, GLD, TLT and EEM (IIRC). They also say it doesn't matter in the long run if you go long or short the underlyings (if you short then sell puts). They started out shorting the stock index futures instead of buying or shorting the ETFs. They claim to be shooting for about 1.5-2% per month profit. They always roll out to the next month even if the UL shoots past the short strike.

    It seems like it would work most of the time but since you have a combination of limited upside with unlimited downside positions there would be times where the losses would overwhelm the gains.

    Any comments?

    (BTW, last week they changed it up and recommended to sell puts on individual stocks instead of calls on the ETFs.)
     
  2. Autodidact

    Autodidact

    Small gains, good accuracy but when they lose, they take it up the chimney, pray that their bad loss is quickly forgotten then back to small gains marathon until the big bad loss comes again.

    They have no edge but they sure love to talk trading LOL
     
  3. PABuster

    PABuster

    Its a good place to learn about options but I am not sure if it has any edge.

    You will feel good about writing as you get good number of small winners. Its something like this.

    I am using an example where we use 5 strikes wide with POP (probability of profit) at 70%, Max profit $69 & Max Loss $431 & we close once we hit 50% of the profit.

    For 10 trades, you are looking at profit of 7 * ($69 * 0.5) = $241.5 versus the loss 3 * $431 = $1293. So negative expectancy.

    If we put 2 times the credit as stop loss (instead of the max loss), you are looking at profit of 7 * ($69 * 0.5) = $241.5 versus the loss 3 * ($69 * 2) = $414. So negative expectancy.

    If we put 2 times the credit as stop loss & say the POP of 80%, you are looking at profit of 8 * ($69 * 0.5) = $276 versus the loss 2 * ($69 * 2) = $276. So negative expectancy if you include commissions.

    If we put 2 times the credit as stop loss & say the POP if 90%, you are looking at profit of 9 * ($69 * 0.5) = $310.5 versus the loss 1 * ($69 * 2) = $138. So Positive expectancy.

    In other words, if 9 out of 10 trades win (90% accuracy) you do get positive expectancy. This does not take in to consideration the rollover they do where they do not take any losses immediately but keep rolling over to take extra credit to reduce the losses over a period of time & come out even. I believe that does help as well.

    As the previous person (Autodidact) pointed out, you get lot of winners and feel good. But one or two giant losers will wipe out a month of profit.

    A simple system that is based on 1:2 Risk Reward with 40% probability of success is still profitable ( For 10 trades with $1 risk and $2 reward Net profit = 4 * $2 - 6*$1 = $2).

    My 2 cents.
     
    Autodidact likes this.
  4. These are valid criticisms of Tastytrade in general. I am asking specifically about their Top Dogs core positions.

    It would help if you had read the OP.
     
  5. Autodidact

    Autodidact

    I did read your post, I don't have an opinion on the Top Dogs. However, I used the opportunity to slam the Tastytrade guys for posting their negative expectancy bullshit.
     
    Chubbly likes this.
  6. samuel11

    samuel11

    And when the sh*t hits the fan, where do you think the correls will go?
     
    Timetwister likes this.
  7. PABuster

    PABuster

    You will see lot of small winners that will make you happy and one giant loser will kill you. Thats tastytrade way of doing it. You need 90% winners to have positive expectancy (does not take in to account the rollover process which reduces the losses little bit).

    So do your own research before you go live with it.
     
    Autodidact and lawrence-lugar like this.

  8. Yea, just sell naked puts instead if you like the strategy the original poster mentioned.